The United States Court of Appeals for the Second Circuit (Second Circuit or Court), which has Federal jurisdiction in Connecticut, New York, and Vermont, recently issued an important decision regarding health care provider liability under the False Claims Act (FCA) when a whistleblower alleges a violation of the Anti-Kickback Statute (AKS). The Second Circuit explicitly adopted the “one purpose” test for the first time to determine whether a financial arrangement between a provider and a referral source violates the AKS, and thus potentially subjects the parties to substantial fines and penalties under the FCA.
In United States ex rel. Camburn v. Novartis Pharm. Corp. (Novartis), a whistleblower alleged that Novartis improperly compensated physicians to promote Gilenya, a drug that treats multiple sclerosis symptoms, at various speaker events that had “no legitimate attendees.” Additionally, the whistleblower alleged that Novartis paid excessive fees to speakers for canceled events and selected speakers to induce them to prescribe the drug. In assessing whether the whistleblower presented sufficient evidence to proceed with this case, the Court relied on the “one purpose” test, a standard long advocated by government regulators and adopted by many other courts nationwide.
Under the “one purpose” test, the Court found that a provider violates the AKS when he/she gives something of value to a referral source if at least one purpose (not just the primary or sole purpose) is to induce the purchase of items or services reimbursed by Federal health care programs such as Medicare or Medicaid. This is true even where the arrangement has one or several perfectly legitimate purposes, such as improving patient care, eliminating administrative burdens, or reducing patient costs.
The Court’s reliance on the “one purpose” test starkly illustrates the significant risks providers now face when they enter into any contractual or financial arrangement with or provide a benefit to any individual or entity who can refer Federal health care program business to them. Government regulators, as well as potential whistleblowers, will likely scrutinize these arrangements even more closely given the Court’s decision. This decision also highlights the increasingly complex relationship between the AKS, its safe harbors, and the FCA, along with the need for consultation with experienced counsel before entering into such arrangements.
Should you have any questions about AKS-compliant arrangements or other compliance needs, please contact the authors, the Garfunkel Wild attorney with whom you regularly work, or email us at info@garfunkelwild.com.